A second source of income alongside your job has long been normal in Germany. Many people start with an online shop, with coaching or a creative side hustle. A side business (Nebengewerbe) brings extra income, more flexibility and low risk. You test your idea without giving up your main job.
At the start, the bureaucracy often feels bigger than it is. Many people are afraid of doing something wrong. In this guide you’ll learn how to register your side business, what it costs and which taxes apply. We’ll also show you why a dedicated account for your finances pays off early on.
The key points at a glance:
- You register a side business with the trade office (Gewerbeamt) before you start. The fee is usually between €20 and €65.
- What matters is not the number of hours, but whether your activity is regular and aims to make a profit.
- The 20-hour-per-week rule decides whether you stay part-time self-employed.
- As a sole trader, you only pay trade tax (Gewerbesteuer) once your annual profit exceeds €24,500.
- With the small-business regulation (Kleinunternehmerregelung) you skip VAT as long as you stay below the limits.
What is a side business (Nebengewerbe)? Definition and distinction
What exactly is a Nebengewerbe? In short, it’s a commercial activity that you run alongside your main job. Your main job stays your most important source of income. The side business runs in addition and on a smaller scale.
Definition of a side business
Legally, there is no separate term “Nebengewerbe”. What’s meant is a normal trade (Gewerbe) that you run part-time. You may also see it called Teilgewerbe or Nebenselbstständigkeit. Nebenerwerb simply means you earn only part of your income from it. You work self-employed, regularly and want to earn money with it. As soon as these features apply, your activity counts as commercial.
As a rule of thumb, the 20-hour rule applies. Anyone who spends fewer than 20 hours a week on the business on average, and earns their living mainly from their main job, stays part-time. This matters for your health and social insurance. In many cases you stay covered through your employer.
Difference between a side business and a main business
A small business alongside your main job and a main business mainly differ in scale. With a side business, the job stays your main source of income. With a main business, you live off the self-employment. This line has consequences for time, insurance and taxes.
| Feature | Side business | Main business |
|---|---|---|
| Working hours | usually under 20 hours per week | full-time, the focus of your work |
| Main income | from employment | from self-employment |
| Health insurance | usually covered through the employer | own cover required |
| Business registration | required | required |
The classification can change. If your side business grows strongly, it can turn into a main business. Different social-insurance rules then apply. So check regularly which way your activity is developing.
Requirements for registering a side business
The requirements for a side business are manageable. You can register most activities without major hurdles. In some industries, though, you need extra proof or a permit.
Personal requirements and permits
Anyone of legal age with full legal capacity can register a side business. So you don’t need a special qualification. For citizens from non-EU countries, a residence permit that allows self-employment may be required. If in doubt, clarify this early with the responsible authority.
Some activities require a licence. These include, for example, gastronomy, security services, insurance and real-estate brokerage or passenger transport. Many crafts also require an entry in the register of craftsmen (Handwerksrolle). A master-craftsman obligation can apply here, though there are exceptions. Check before you start whether your industry needs a permit.
Employer consent
You don’t always have to register a side business with your employer. Official approval is usually not required. Consent is mainly mandatory in the public sector or when your employment contract contains a relevant clause. In many cases it’s enough to inform your employer.
Even so, there are limits. Your employer can forbid a secondary activity if it competes directly with them or if your performance in the main job suffers. Working time law and confidentiality obligations also play a role. An open conversation creates clarity here and prevents conflict.
How to register a side business: step-by-step
How do I register a side business? In practice it’s only a few steps. Here’s how to go about it:
You file the trade notification (Gewerbeanzeige) with the GewA1 form at the responsible trade office, online or in person. You then receive the trade licence (Gewerbeschein).
The tax office sends you the tax registration questionnaire via ELSTER. There you state your turnover and choose the small-business regulation.
You usually become a member of the IHK or the Chamber of Crafts. Also check whether a professional association is responsible.
With a dedicated account you keep private and business finances cleanly separate from the start.
Business registration with the trade office
You register your side business with the trade office at your place of business. Many cities now offer the registration online. In smaller municipalities an in-person appointment is common. For the registration you need your identity card or passport, your registered address and a short description of your activity. For licence-requiring professions, the relevant proof is added.
In the GewA1 form you enter your details and the type of activity, among other things. A common mistake is a description that’s too narrow. It’s better to phrase it a little broader so you don’t have to re-register later. The fee is between €20 and €65 depending on the municipality. You often get the trade licence on the spot; online it takes a few days.
Registration with the tax office
After the business registration, the trade office automatically notifies the tax office of your activity. A short time later you receive the tax registration questionnaire. You complete it online via ELSTER and return it on time. The planned turnover and the description of your activity are important.
This is also where you decide on the small-business regulation. You then receive your tax number for the side business. The tax number is not the same as the VAT identification number. You only need the VAT ID once you regularly invoice business partners in other EU countries.
Open a business account
Private and business payments belong apart. That creates order and makes bookkeeping easier. During a tax audit it saves you a lot of searching. You usually work out your profit with a cash-basis income statement (Einnahmen-Überschuss-Rechnung, EÜR). Clear rules apply to invoicing (Rechnungsstellung) and to the retention obligation (Aufbewahrungspflicht). Your tax return also gets simpler, because all income and expenses sit in one place.
With the Vivid business account you get started quickly and without a branch appointment. You pay €0/month on the Standard plan. Through sub-accounts you set money aside for taxes automatically. You see expenses in real time, and for international jobs you use several currencies.
Ready for your side business?
With the Vivid business account you separate private and business finances right from the start, with sub-accounts, cards and tools for your bookkeeping.
Cost of business registration
What does a side business cost? The registration itself is cheap. But there are running costs you should plan for.
Fees and running costs
The fee for the business registration depends on the municipality. In Berlin you pay around €26, in Munich about €40 and in Hamburg roughly €20. Registering a side business therefore usually costs a one-off €20 to €65. After that come the running expenses. These vary depending on the industry.
| Item | Approximate cost |
|---|---|
| Business registration (one-off) | €20–65 |
| IHK or Chamber of Crafts fee | €0–300 per year |
| Bookkeeping software | €0–30 per month |
| Tax advisor (optional) | €50–200 per month |
| Business account | from €0/month on the Standard plan at Vivid |
Many chambers waive the fee for small side businesses or charge only a small amount. A tax advisor isn’t a must for simple cases. With a clearly run account and simple software, you keep the running costs low.
Taxes on a side income
You also pay tax on your profit from a side income. Which taxes apply depends on your income and your activity. Three types of tax are important.
Which taxes apply?
The first is income tax. Your profit from the side business is added to your salary. Up to the basic tax-free allowance (Grundfreibetrag), your income stays tax-free. You tax both together at the normal rate. At higher profits, the tax office can set advance payments on your taxes. The second is trade tax (Gewerbesteuer). For sole proprietorships, a tax-free allowance of €24,500 applies. Only above this profit does trade tax become due. Most side businesses stay below it. The third is VAT (Umsatzsteuer). It doesn’t apply if you use the small-business regulation.
Small-business regulation under § 19 UStG
With the small-business regulation you don’t have to show VAT on your invoices. The limits are currently €25,000 turnover in the previous year and €100,000 in the current year. This noticeably reduces your effort, because the advance VAT return is no longer needed.
The regulation has one catch, though. You can’t reclaim input VAT on your purchases. Anyone who invests a lot is sometimes better off without it. You choose it in the tax registration questionnaire. You’re then bound to the decision for several years.
Deductible expenses and business costs
All costs that arise from your side business reduce your profit. These business expenses lower your tax bill in the end. What matters is that you collect receipts and document them cleanly. Typical examples:
Side business and main job: what to keep in mind
A trade alongside your main job comes with a few rules of the game. Knowing them avoids trouble with your employer, health insurer and the authorities.
Time limits and labour-law aspects
The 20-hour rule is the most important benchmark. Stay below it on average and you still count as part-time self-employed. Exceed it permanently and the health insurer can classify you as full-time. You then pay your own contributions.
Even as an employee with a full-time job you may generally register a business. Working time law sets limits, though. Job and side business together must not exceed 48 hours a week on average. Your employer may restrict the side business if it competes with them. So inform them in good time, especially in the public sector. If you work for only one client, check a status determination procedure (Statusfeststellungsverfahren). That way you avoid the suspicion of bogus self-employment (Scheinselbstständigkeit).
Impact on social benefits
If you receive social benefits, the income from the side business counts. With unemployment benefit you have to report the extra income. With basic income support, allowances apply, and income above them is offset. BAföG (student aid) and parental allowance also have income limits.
The exact allowances change regularly. So check the current figures with the responsible office. Always report income on time. That way you avoid claw-backs.
Frequently asked questions about side businesses
When do you have to register a side business?
You register your side business before you start. Even the first customer order or the first advert counts as the beginning of the activity. What’s decisive is the intention to make a profit, not the level of income. Anyone who registers too late risks a fine.
Can I register a side business online?
In many cities, yes. Larger municipalities offer the business registration fully online, often with an electronic ID. Smaller municipalities sometimes require an in-person appointment. Check your trade office’s website.
How many hours can I work at most in a side business?
As a guideline, the 20-hour rule per week applies. It’s not a rigid limit but a benchmark for social insurance. Job and business together must not exceed 48 hours a week on average.
Do I need a business account for a side business?
There’s no obligation for sole proprietorships. Even so, a dedicated account is highly recommended. It separates private and business payments and makes bookkeeping easier. The Vivid business account starts at €0/month on the Standard plan.
Do I have to choose the small-business regulation?
No, it’s voluntary. It’s worth it if you invest little and want to save effort. Anyone who buys a lot tends to benefit from the input-VAT deduction without the regulation. You decide in the tax registration questionnaire.
Conclusion: starting a side business made easy
Starting a side business is manageable with a bit of preparation. The registration is cheap and quickly done. The benefits clearly outweigh the effort. You build up extra income and develop new skills, at low risk.
Registering on time is important. That way you avoid fines and stress with the tax office. Separate your finances from the start. Then you have more time for what matters: your business.
Next steps
Note: the content of this blog is for general information only and does not constitute legal, financial, investment or tax advice. It is not a recommendation or a basis for financial decisions. Before taking action based on the information provided, you should always seek advice from qualified professionals who can take your individual circumstances into account.
